ARE YOU STILL AFRAID OF MUTUAL FUNDS?

• We can shift from being a perennially loss-averse investor to an optimistic long-term mutual fund investor if we learn the art of managing risk while building our wealth.
• It can begin with a simple, well-diversified asset allocation to ensure that impacts do not dent the entire portfolio significantly.
• Secondly, we should never believe that risk-free investments exist, as historical data for all asset classes clearly establishes that risks exist in all of them.
• Thirdly, we should stop trying to predict the future asset prices ourselves, or insist from others to do so for us, while constructing our portfolio, and ensure we hold a combination of funds as per our own risk appetite.
• Fourthly, we should stop searching for the next best thing to bet on, and focus on managing risks in our own portfolio.
• Lastly, we should have a clearly laid out corrective action plan when the risk occurs, by setting our risk tolerance level beyond which it hurts the portfolio returns.
• While determining our investment risk appetite, we should be clear about our income & financial stability, retirement & dependents, loans & liabilities, needs & savings, and short-term, medium-term & long-term goals.
• This will help in our choice of mutual funds, based on whether we are a conservative, moderate or an aggressive investor.